Hospitals performed small amount of cost-shifting, study finds

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Dive Brief:

A new National Bureau of Economic Research report on cost-shifting found that Affordable Care Act cost containment strategies resulted in hospitals negotiating 1.5% higher average private payer reimbursements to offset the cuts from public payers.

The largest increases in payments were for circulatory system (2.7%) and nervous system (3.2%) claims.

Researchers also found the greatest cost-shifting occurred in hospitals with higher shares of private insurance patients.

Dive Insight:

Cost-shifting, or hospitals making up for lower public payer reimbursements by negotiating higher payments from private insurers, has long been debated in healthcare. Some experts believe that hospitals shift more costs onto private payers to offset lower payments from public payers. However, other experts refute those claims.

In this new NBER report, researchers reviewed roughly 50% of inpatient prospective payment hospitals in the U.S. between 2010 and 2015. They found hospitals that faced net payment reductions from the ACA, namely through the Hospital Readmission Reduction Program (HRRP) and Hospital Value-Based Purchasing Program (HVBP), had higher average private payments. They found those hospitals received about $155 extra for the average care claim or $82,000 per hospital between 2013 and 2015.

The researchers also found that penalized hospitals decreased Medicare discharges by 2.5%. Meanwhile, discharges for private payers “were small and insignificant,” according to the report.

“Collectively, our baseline results provide support for the notion of a small degree of cost-shifting in the modern healthcare environment, equivalent to about a 56 cent increase in private payments for a $1 decrease in public payments,” according to the report.

The report confirms what many healthcare experts believed — namely, that hospitals are relying on higher payments from private insurers to help offset sagging public payer reimbursements.

“These results… suggest that hospitals do not respond to HRRP/HVBP penalties by shifting service offerings disproportionately toward more profitable services or by treating patients more intensively. Indirectly, the results therefore support the hypothesis that our estimated increase in payments derives from some underlying increase in actual prices,” the authors said.

Hospitals are generally facing a trend of lower reimbursements. Some have looked to merge with other systems and gain leverage for negotiating with payers. Others look more toward vertical integration and establishing their own health plans.